Love 'em or hate 'em, Wal-Mart may be the next biggest force in changing how the recording industry works. We've already talked about how music retailers may be the real bottleneck to changing how the recording industry views its business model. However, Wal-Mart isn't like any other music retailer. To them, selling music is a loss-leader to help them sell consumer electronics. However, Wal-Mart also has such a dominant spot in the market that they can force companies to make massive changes (see what they did with barcodes, and what they're doing with RFID). So, now, they're actively trying to force the price down on CDs, saying they want to be able to sell most CDs for less than $10. They're already taking a loss on CD sales, but want that loss to be much smaller -- and if they don't get it, they're threatening to give up more shelf space to DVDs and video games (the real threats to CD sales). This is interesting for a variety of reasons. First, Universal tried to drop prices last year, but many retailers rebelled, and none of the other major labels followed. What may also be interesting is how this impacts the idea of "the long tail". As Chris Anderson has shown, there's plenty of money to be made in selling less popular things, and here's Wal-Mart suggesting they may shrink inventory even more. Already, they only offer less than 10% the inventory of a Tower Records, and they're threatening to cut that even further. All that really means is it will open up more opportunities for those focusing on selling within the long tail, rather than worrying about how Wal-Mart competes with them.
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